Evercore ISI initiated coverage of Red Cat Holdings Inc. (NASDAQ:RCAT) on Monday with an Outperform rating and a $15 price target, in a note titled “Ready. Set. Fly” that frames the Department of Defense’s shifting procurement priorities as a multi-year tailwind for the company.
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Evercore Initiates RCAT at Outperform, $15 price target
Analyst Amit Daryanani said the Pentagon’s drone budget has undergone a structural shift, with the Department of Defense proposing $53.6 billion for its Drone Dominance Program in fiscal 2027 — the largest single commitment to drones in Pentagon history.
Daryanani argued the shift could create a recurring replenishment cycle for Red Cat, since drones are increasingly treated as consumables rather than durable, long-life assets.
The Black Widow Moat
The note also pointed to a “qualification moat” building around Red Cat’s Black Widow drone. The company’s win of the Army’s Short-Range Reconnaissance program has helped establish Black Widow as a staple platform, a position reinforced by separate U.S. Air Force investment in the same aircraft, according to Evercore.
On the numbers, Evercore projects fiscal 2026 sales of $150 million to $180 million, which Daryanani said reflects strong second-half expectations that could outperform Street consensus.
He flagged the handling of unobligated defense funds as a swing factor that could boost demand once additional contracts materialize in the third quarter.
Evercore also called Red Cat’s Variant 7 unmanned surface vessel a “call option” on the stock, citing ongoing production and evolving contract interpretations tied to the U.S. Navy as a longer-dated growth lever.
On margins, the firm said Red Cat is targeting 30% gross margins by fiscal 2026, aided by a mix shift toward higher-priced unmanned surface vessels.
Evercore Likes the Setup
Evercore said the broader setup is supported by a robust balance sheet and continued capital and inventory investment, with demand expected to ramp across multiple military branches and allied nations over time.
The firm cautioned that defense budget fluctuations and contract delays remain the key risks, and said order timing and competitive dynamics warrant close monitoring.
Red Cat shares closed at $8.49 on Friday, down 8.51% on the session. Evercore’s $15 target implies upside of roughly 77% from that level, while the broader Street’s average target has climbed to $18.
RCAT Stock Price Action: According to data from Benzinga Pro, Red Cat stock was up 0.47% at $8.54 at the time of publication Monday.
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